Teekay LNG Partners Reports Fourth Quarter and Annual Results

Generated distributable cash flow of $63.4 million in the fourth quarter of 2013, an increase of 18 percent from the fourth quarter of 2012.

Declared fourth quarter 2013 cash distribution of $0.6918 per unit, an increase of 2.5 percent from the previous quarter.

In November 2013, acquired and bareboat chartered-back a second LNG carrier newbuilding with Awilco LNG.

In November 2013, exercised an option for one additional MEGI LNG carrier newbuilding to be delivered in 2017.

Total liquidity of approximately $332 million as at December 31, 2013.

Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE:TGP), today reported the Partnership's results for the quarter ended December 31, 2013. During the fourth quarter of 2013, the Partnership generated distributable cash flow(1) of $63.4 million, compared to $53.6 million in the same quarter of the previous year. The increase in distributable cash flow was primarily due to the Partnership's acquisition of a 50 percent interest in Exmar LPG BVBA, a liquefied petroleum gas (LPG) carrier joint venture with Exmar N.V. (Exmar), in February 2013 and its acquisition and charter-back of two liquefied natural gas (LNG) carriers from Awilco LNG ASA (Awilco) in September and November 2013. The increase was partially offset by reduced cash flow following the sale of the Tenerife Spirit conventional tanker in December 2013.

On January 15, 2014, the Partnership declared a cash distribution of $0.6918 per unit for the quarter ended December 31, 2013, an increase of $0.0168 per unit, or 2.5 percent, from the previous quarter. The cash distribution was paid on February 14, 2014 to all unitholders of record on January 31, 2014.

"Teekay LNG continued on its course of steady growth in 2013 with the accretive acquisition-charterback transactions with Awilco LNG, which enabled us to increase the Partnership's fourth quarter distribution by 2.5 percent to $0.6918 per unit," commented Peter Evensen, Chief Executive Officer of Teekay GP LLC. "Looking ahead, in addition to the two MEGI LNG carrier newbuildings chartered to Cheniere starting in 2016, we expect the Partnership's three currently unchartered MEGI LNG carrier newbuildings delivering in 2017 will be well-positioned to take advantage of the anticipated strong LNG shipping fundamentals relating to the expected start-up of several new LNG liquefaction projects beginning in 2016," Mr. Evensen continued. "In addition to securing employment for these three unchartered newbuildings, the Partnership is also engaged in LNG shipping and floating regasification project tender opportunities with expected start-up dates in the same timeframe."

Mr. Evensen added, "With 100 percent of Teekay LNG's on-the-water LNG carrier fleet operating under fixed-rate contracts with an average remaining duration of 12 years, the Partnership is largely insulated from the recent declines in spot LNG shipping rates. Over the next three years, only two of Teekay LNG's LNG carriers, both of which are 52-percent owned, are scheduled to roll-off their existing contracts, limiting the Partnership's exposure to any short-term rate volatility through 2016."

(1)

Distributable cash flow is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix B for a reconciliation of this non-GAAP measure to the most directly comparable financial measure under United States generally accepted accounting principles (GAAP).

Recent Transactions

Exercised Option for an Additional LNG Carrier Newbuilding

In November 2013, Teekay LNG exercised an option with Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME) of South Korea for one additional 173,400 cubic meter (cbm) LNG carrier newbuilding. This vessel will be equipped with the M-type, Electronically Controlled, Gas Injection (MEGI) twin engines, which are expected to be significantly more fuel-efficient and have lower emission levels than other engines currently being utilized in LNG shipping. The Partnership intends to secure long-term charter contract employment for the vessel prior to its delivery in 2017. In connection with exercising the option in November 2013, the Partnership was also able to delay the delivery dates for the two 173,400 cbm LNG carrier newbuildings ordered in July 2013 from 2016 to 2017 to better coincide with the expected timing of new LNG shipping projects. Currently, the Partnership has options with DSME for up to three additional LNG carrier newbuildings.

Acquisition and Bareboat Charter-Back of Second LNG Carrier Newbuilding

In September 2013, Teekay LNG agreed to acquire a second 155,900 cbm LNG carrier newbuilding from Awilco on similar terms as the first vessel. The second vessel was delivered to the Partnership in late-November 2013 and bareboat-chartered to Awilco on a four-year fixed-rate charter contract (plus a one-year extension option) with a fixed-price purchase obligation at the end of the initial term (and option period). Similar to the first Awilco vessel, the second vessel's purchase price was $205 million less a $50 million upfront prepayment of charter hire by Awilco, which is in addition to the daily bareboat charter rate.

Exmar LPG Joint Venture Secured Long-term Contracts

In late January 2014, Exmar LPG BVBA, the Partnership's LPG joint venture with Exmar NV, was awarded two five-year fixed-rate time-charter contracts, up to a maximum of 10 years, with Statoil ASA. The contracts are expected to be serviced by two LPG carrier newbuildings currently under construction at Hanjin Heavy Industries and Construction Co., Ltd., which are scheduled for delivery in 2016.

Also in late January 2014, Exmar LPG BVBA was awarded two 10-year fixed-rate time-charter contracts with Potash Corporation. The contracts will be serviced by two of Exmar LPG BVBA's existing on-the-water LPG carriers.

Financial Summary

The Partnership reported adjusted net income attributable to the partners(1) (as detailed in Appendix A to this release) of $46.2 million for the quarter ended December 31, 2013, compared to $38.5 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of increasing net income by $1.3 million and decreasing net income by $10.3 million for the three months ended December 31, 2013 and 2012, respectively, as detailed in AppendixA. Including these items, the Partnership reported net income attributable to the partners, on a GAAP basis, of $47.5 million and $28.2 million for the three months ended December 31, 2013 and 2012, respectively. Adjusted net income attributable to the partners for the three months ended December 31, 2013 increased from the same period in the prior year, mainly due to the acquisitions of the two LNG carriers from Awilco and the acquisition of the Partnership's 50 percent interest in Exmar LPG BVBA in February 2013.

For the year ended December 31, 2013, the Partnership reported adjusted net income attributable to the partners(1) (as detailed in Appendix A to this release) of $175.0 million, compared to $156.3 million for the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of increasing net income by $26.2 million and decreasing net income by $32.6 million for the year ended December 31, 2013 and 2012, respectively, as detailed in Appendix A. Including these items, the Partnership reported net income attributable to the partners, on a GAAP basis, of $201.2 million and $123.7 million for the year ended December 31, 2013 and 2012, respectively. Adjusted net income attributable to the partners for the year ended December 31, 2013 increased from the same period in the prior year, mainly due to the acquisitions of the two LNG carriers from Awilco, the acquisition of the Partnership's 50 percent interest in Exmar LPG BVBA in February 2013 and the acquisition of the Partnership's 52 percent interest in six LNG carriers from A.P. Moller-Maersk A/S in February 2012.

For accounting purposes, the Partnership is required to recognize the changes in the fair value of its outstanding derivative instruments that are not designated as hedges for accounting purposes in net income. This method of accounting does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized gains or losses on the consolidated statements of income as detailed in notes 5, 6 and 7 to the Summary Consolidated Statements of Income and Comprehensive Income included in this release.

(1)

Adjusted net income attributable to the partners is a non-GAAP financial measure. Please refer to Appendix A to this release for a reconciliation of this non-GAAP measure to the most directly comparable financial measure under GAAP and information about specific items affecting net income which are typically excluded by securities analysts in their published estimates of the Partnership's financial results.

Operating Results

The following table highlights certain financial information for Teekay LNG's two segments: the Liquefied Gas segment and the Conventional Tanker segment (please refer to the "Teekay LNG's Fleet" section of this release below and Appendices C through F for further details).

Three Months EndedDecember 31, 2013(unaudited)

Three Months EndedDecember 31, 2012(unaudited)

(in thousands of U.S. Dollars)

Liquefied Gas Segment

Conven-tional Tanker Segment

Total

Liquefied Gas Segment

Conven-tional Tanker Segment

Total

Net voyage revenues(i)

77,166

26,823

103,989

70,545

27,364

97,909

Vessel operating expenses

14,106

11,058

25,164

13,846

11,924

25,770

Depreciation and amortization

17,916

6,229

24,145

17,359

8,868

26,227

CFVO from consolidated vessels(ii)

63,246

10,964

74,210

54,285

13,069

67,354

CFVO from equity accounted vessels(iii)

52,626

-

52,626

38,498

-

38,498

Total CFVO(ii)

115,872

10,964

126,836

92,783

13,069

105,852

(i)

Net voyage revenues represents voyage revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions. Net voyage revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see Appendix C for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure.

(ii)

Cash flow from vessel operations (CFVO) from consolidated vessels represents income from vessel operations before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts, (c) loan loss recovery, (d) write down of vessels, and includes (e) adjustments for direct financing leases and on two Suezmax tankers to a cash basis. CFVO is included because certain investors use this data to measure a company's financial performance. CFVO is not required by GAAP and should not be considered as an alternative to net income, equity income or any other indicator of the Partnership's performance required by GAAP. Please see Appendix E for a reconciliation of CFVO from consolidated vessels (a non-GAAP measure) as used in this release to the most directly comparable GAAP financial measure.

(iii)

The Partnership's equity accounted investments for the three months ended December 31, 2013 and 2012 include the Partnership's 40 percent interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership's 50 percent interest in the Excalibur and Excelsior joint ventures with Exmar, which own one LNG carrier and one regasification unit, respectively; the Partnership's 33 percent interest in four LNG carriers servicing the Angola LNG Project; and the Partnership's 52 percent interest in Malt LNG Netherlands Holdings B.V., the joint venture between the Partnership and Marubeni Corporation, which owns six LNG carriers (Malt LNG Carriers). The Partnership's equity accounted investments for the three months ended December 31, 2013 also includes the Partnership's 50 percent interest in Exmar LPG BVBA, the joint venture between the Partnership and Exmar, acquired in February 2013, which currently owns and charters-in 28 vessels in the LPG carrier segment, including 12 newbuildings. Please see Appendix F for a description and reconciliation of CFVO from equity accounted vessels (a non-GAAP measure) as used in this release to the most directly comparable GAAP financial measure.

Liquefied Gas Segment

Cash flow from vessel operations from the Partnership's Liquefied Gas segment, excluding equity accounted vessels, increased to $63.2 million in the fourth quarter of 2013 from $54.3 million in the same quarter of the prior year. The increase is primarily the result of the acquisition of the two LNG carriers from Awilco in September and November 2013.

Cash flow from vessel operations from the Partnership's equity accounted vessels in the Liquefied Gas segment increased to $52.6 million in the fourth quarter of 2013 from $38.5 million in the same quarter of the prior year. This increase was primarily due to the acquisition of a 50 percent interest in the Exmar LPG BVBA joint venture in February 2013 and an increase in the revenue relating to one of the Malt LNG Carriers, which commenced a new three-year charter contract at a higher rate during the third quarter of 2013.

Conventional Tanker Segment

Cash flow from vessel operations from the Partnership's Conventional Tanker segment decreased to $11.0 million in the fourth quarter of 2013 from $13.1 million in the same quarter of the prior year, primarily due to the sale of the Tenerife Spirit in mid-December 2013 and the scheduled dry docking of two Suezmax tankers which resulted in 48 days of off-hire in the fourth quarter of 2013. This decrease was partially offset by an increase in the tanker rates for two of the Partnership's Suezmax tankers in the fourth quarter of 2013.

Teekay LNG's Fleet

The following table summarizes the Partnership's fleet as of February 1, 2014:

Number of Vessels

Owned
Vessels

In-Chartered Vessels

Newbuildings

Total

LNG Carrier Fleet

29 (i)

-

5

34

LPG/Multigas Carrier Fleet

16 (ii)

5 (iii)

12 (iii)

33

Conventional Tanker Fleet

10

-

-

10

Total

55

5

17

77

(i)

The Partnership's ownership interests in these vessels range from 33 percent to 100 percent.

(ii)

The Partnership's ownership interests in these vessels range from 50 percent to 99 percent.

(iii)

The Partnership's interest in these vessels is 50 percent.

Liquidity and Continuous Offering Program Update

In May 2013, the Partnership implemented a continuous offering program (COP) under which the Partnership may issue new common units, representing limited partner interests, at market prices up to a maximum aggregate amount of $100 million. Through to December 31, 2013, the Partnership had sold an aggregate of 124,071 common units under the COP, generating net proceeds of approximately $4.9 million (including the Teekay LNG general partner's 2 percent proportionate capital contribution and net of offering costs). The Partnership did not sell any units under the COP during the fourth quarter of 2013.

As of December 31, 2013, the Partnership had total liquidity of $332.2 million (comprised of $139.5 million in cash and cash equivalents and $192.7 million in undrawn credit facilities).

Conference Call

The Partnership plans to host a conference call on Friday, February 21, 2014 at 11:00 a.m. (ET) to discuss the results for the fourth quarter and fiscal year of 2013. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:

By accessing the webcast, which will be available on Teekay LNG's website at www.teekaylng.com (the archive will remain on the web site for a period of 30 days).

A supporting Fourth Quarter and Fiscal Year 2013 Earnings Presentation will also be available at www.teekaylng.com in advance of the conference call start time.

The conference call will be recorded and made available until Friday, February 28, 2014. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 2916125.

About Teekay LNG Partners L.P.

Teekay LNG Partners is the world's second largest independent owner and operator of LNG carriers, providing LNG, LPG and crude oil marine transportation services primarily under long-term, fixed-rate charter contracts through its interests in 34 LNG carriers (including one LNG regasification unit and five newbuildings), 33 LPG/Multigas carriers (including five chartered-in LPG carriers and 12 newbuildings) and 10 conventional tankers. The Partnership's interests in these vessels range from 33 to 100 percent. Teekay LNG Partners L.P. is a publicly-traded master limited partnership (MLP) formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.

Teekay LNG Partners' common units trade on the New York Stock Exchange under the symbol "TGP".

To more closely align the Partnership's Statement of Income and Comprehensive Income presentation to many of its peers, the cost of ship management services of $2.0 million and $7.8 million for the three months and year ended December 31, 2013, respectively, and $2.0 million for the three months ended September 30, 2013, have been included as vessel operating expenses. Prior to 2013, the Partnership included these amounts in general and administrative expenses. All such costs incurred in comparative periods have been reclassified from general and administrative expenses to vessel operating expenses to conform to the presentation adopted in the current period. The amounts reclassified were $2.1 million and $8.2 million for the three months and year ended December 31, 2012, respectively.

(2)

In early-2012, Teekay BLT Corporation (Teekay Tangguh Joint Venture), in which the Partnership has a 69 percent ownership interest, advanced amounts to P.T. Berlian Laju Tanker, the parent company of the non-controlling shareholder of the Teekay Tangguh Joint Venture, as an advance of dividends. In July 2012, P.T. Berlian Laju Tanker entered into a court-supervised restructuring in Indonesia in order to restructure its debts. In September 2013, the Teekay Tangguh Joint Venture recorded a $3.8 million loan loss provision relating to the advances to P.T. Berlian Laju Tanker, as it was probable, at that time, that the carrying value of the loan was impaired. However, during the fourth quarter of 2013, as P.T. Berlian Laju Tanker had sufficiently restructured its business, the Teekay Tangguh Joint Venture reassessed the probability of collectability of this advance and reversed the loan loss provision previously recorded in September 2013. On February 1, 2014, the Teekay Tangguh Joint Venture declared dividends of $69.5 million of which $14.4 million was used to offset the total advances to its non-controlling shareholder and P.T. Berlian Laju Tanker.

The carrying value of three of the Partnership's conventional Suezmax tankers (the Tenerife Spirit, Algeciras Spirit and Huelva Spirit) was written down during the three months and year ended December 31, 2012 due to the expected termination of their time-charter contracts in 2013 and 2014. The estimated fair value was based on a discounted cash flow approach and such estimates of cash flows were based on existing time-charter contracts, lease obligations and budgeted operating costs.

(5)

Equity income includes unrealized gains on derivative instruments and any ineffectiveness for any derivative instruments designated as hedges for accounting purposes as detailed in the table below:

The realized losses relate to the amounts the Partnership actually paid to settle derivative instruments and the unrealized (losses) gains relate to the change in fair value of such derivative instruments as detailed in the table below:

Three Months Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2013

2013

2012

2013

2012

Realized (losses) gains relating to:

Interest rate swaps

(9,535)

(9,532)

(9,614)

(38,089)

(37,427)

Toledo Spirit time-charter derivative contract

641

903

945

1,521

907

(8,894)

(8,629)

(8,669)

(36,568)

(36,520)

Unrealized gains (losses) relating to:

Interest rate swaps

2,556

(2,314)

21,442

18,868

5,200

Toledo Spirit time-charter derivative contract

1,100

(200)

1,600

3,700

1,700

3,656

(2,514)

23,042

22,568

6,900

Total realized and unrealized (losses) gains on derivative instruments

(5,238)

(11,143)

14,373

(14,000)

(29,620)

(7)

For accounting purposes, the Partnership is required to revalue all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period. This revaluation does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized foreign currency translation gains or losses in the consolidated statements of income and comprehensive income.

Foreign exchange loss includes realized (losses) gains relating to the amounts the Partnership received (paid) to settle the Partnership's non-designated cross currency swap that was entered into as an economic hedge in relation to the Partnership's Norwegian Kroner (NOK)-denominated unsecured bonds. The Partnership issued NOK 700 million and NOK 900 million of unsecured bonds in May 2012 and September 2013 that mature in 2017 and 2018, respectively. Foreign exchange loss also includes unrealized (losses) gains relating to the change in fair value of such derivative instruments, partially offset by unrealized gains (losses) on the revaluation of the NOK bonds as detailed in the table below:

Three Months Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2013

2013

2012

2013

2012

Realized (losses) gains on cross-currency swaps

(216)

(113)

102

(338)

257

Unrealized (losses) gains on cross-currency swaps

(2,832)

(3,650)

4,516

(15,404)

(2,677)

Unrealized gains (losses) on revaluation of NOK bonds

2,512

(723)

(3,523)

12,257

(791)

TEEKAY LNG PARTNERS L.P.

CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. Dollars)

As at December 31, 2013

As at September 30, 2013

As at December 31, 2012

(unaudited)

(unaudited)

(unaudited)

ASSETS

Current

Cash and cash equivalents

139,481

118,131

113,577

Restricted cash - current

-

2,996

34,160

Accounts receivable

19,844

19,869

13,408

Prepaid expenses

5,756

7,720

5,836

Current portion of derivative assets

18,444

18,449

17,212

Current portion of net investments in direct financing leases

16,441

11,747

6,656

Current portion of advances to joint venture partner

14,364

-

-

Advances to affiliates

6,634

3,798

13,864

Total current assets

220,964

182,710

204,713

Restricted cash - long-term

497,298

496,351

494,429

Vessels and equipment

At cost, less accumulated depreciation

1,253,763

1,260,588

1,286,957

Vessels under capital leases, at cost, less accumulated depreciation

571,692

607,026

624,059

Advances on newbuilding contracts

97,207

77,854

38,624

Total vessels and equipment

1,922,662

1,945,468

1,949,640

Investment in and advances to equity accounted joint ventures

671,789

649,851

409,735

Net investments in direct financing leases

683,254

538,964

396,730

Advances to joint venture partner

-

10,200

14,004

Other assets

28,284

29,964

25,233

Derivative assets

62,867

80,439

145,347

Intangible assets - net

96,845

99,769

109,984

Goodwill - liquefied gas segment

35,631

35,631

35,631

Total assets

4,219,594

4,069,347

3,785,446

LIABILITIES AND EQUITY

Current

Accounts payable

1,741

2,260

2,178

Accrued liabilities

45,796

37,013

38,134

Unearned revenue

15,455

10,146

19,417

Current portion of long-term debt

97,114

88,096

86,489

Current obligations under capital lease

31,668

157,649

70,272

Current portion of derivative liabilities

76,980

72,024

48,046

Advances from affiliates

19,270

16,870

12,083

Total current liabilities

288,024

384,058

276,619

Long-term debt

1,680,393

1,645,302

1,326,864

Long-term obligations under capital lease

566,661

472,621

567,302

Long-term unearned revenue

36,689

36,521

38,570

Other long-term liabilities

73,140

73,589

73,568

Derivative liabilities

130,903

154,261

248,249

Total liabilities

2,775,810

2,766,352

2,531,172

Equity

Limited partners

1,338,133

1,206,043

1,165,634

General Partner

52,526

48,502

47,346

Accumulated other comprehensive income (loss)

131

(1,549)

-

Partners' equity

1,390,790

1,252,996

1,212,980

Non-controlling interest (1)

52,994

49,999

41,294

Total equity

1,443,784

1,302,995

1,254,274

Total liabilities and total equity

4,219,594

4,069,347

3,785,446

(1)

Non-controlling interest includes a 30 percent equity interest in the RasGas II project (which owns three LNG carriers), a 31 percent equity interest in the Tangguh Project (which owns two LNG carriers), a 1 percent equity interest in two LNG carriers (Arctic Spirit and Polar Spirit), a 1 percent equity interest in the Excalibur joint venture (which owns one LNG carrier), a 1 percent equity interest in the five LPG/Multigas carriers that are chartered out to I.M. Skaugen ASA, and a 1 percent equity interest in two LNG carriers chartered out to Awilco, which in each case represents the ownership interest not owned by the Partnership.

Set forth below is a reconciliation of the Partnership's unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership's financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership's financial results. Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.

Three Months EndedDecember 31

Year EndedDecember 31

2013

2012

2013

2012

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net income - GAAP basis

52,172

37,120

213,315

139,142

Less:

Net income attributable to non-controlling interest

(4,644)

(8,895)

(12,073)

(15,437)

Net income attributable to the partners

47,528

28,225

201,242

123,705

Add (subtract) specific items affecting net income:

Unrealized foreign currency exchange losses(1)

4,866

6,300

15,674

8,213

Unrealized gains from derivative instruments(2)

(3,656)

(23,042)

(22,568)

(6,900)

Unrealized gains from derivative instruments and other items from equity accounted investees(3)

(5,284)

(8,849)

(25,918)

(3,721)

Loan loss recovery(4)

(3,804)

-

-

-

Restructuring charge(5)

1,786

-

1,786

-

Income tax expense(6)

3,050

-

3,050

-

Write down of vessels(7)

-

29,367

-

29,367

Non-controlling interests' share of items above(8)

1,738

6,497

1,689

5,650

Total adjustments

(1,304)

10,273

(26,287)

32,609

Adjusted net income attributable to the partners

46,224

38,498

174,955

156,314

(1)

Unrealized foreign exchange losses primarily relate to the Partnership's revaluation of all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period and unrealized loss on the cross-currency swap economically hedging the Partnership's NOK bond and exclude the realized gains relating to the cross currency swap for the NOK bonds.

(2)

Reflects the unrealized losses (gains) due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes.

(3)

Reflects the unrealized (gains) losses due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes and any ineffectiveness for any derivative instruments designated as hedges for accounting purposes within the Partnership's equity-accounted investments. In addition, it also reflects $1.1 million of acquisition-related costs during the year ended December 31, 2012 relating to the acquisition of the Malt LNG Carriers in February 2012 and a $0.8 million provision during the three months and year ended December 31, 2012 relating to a prior year customer claim from the Excalibur and Excelsior joint ventures.

(4)

In early-2012, Teekay BLT Corporation, in which the Partnership has a 69 percent ownership interest, advanced amounts to P.T. Berlian Laju Tanker, the parent company of the non-controlling shareholder of the Teekay Tangguh Joint Venture, as an advance of dividends. In July 2012, P.T. Berlian Laju Tanker entered into a court-supervised restructuring in Indonesia in order to restructure its debts. In September 2013, the Teekay Tangguh Joint Venture recorded a $3.8 million loan loss provision relating to the advances to P.T. Berlian Laju Tanker, as it was probable, at that time, that the carrying value of the loan was impaired. However, during the fourth quarter of 2013, as P.T. Berlian Laju Tanker had sufficiently restructured its business, the Teekay Tangguh Joint Venture reassessed the probability of collectability of this advance and reversed the loan loss provision previously recorded in September 2013. On February 1, 2014, the Teekay Tangguh Joint Venture declared dividends of $69.5 million of which $14.4 million was used to offset the total advances to its non-controlling shareholder and P.T. Berlian Laju Tanker.

Reflects an annual adjustment to the Partnership's valuation allowance for its deferred tax assets.

(7)

The carrying value of three of the Partnership's conventional Suezmax tankers (the Tenerife Spirit, Algeciras Spirit and Huelva Spirit) was written down during the three months and year ended December 31, 2012 due to the expected termination of their time-charter contracts in 2013 and 2014. The estimated fair value was based on a discounted cash flow approach and such estimates of cash flows were based on existing time-charter contracts, lease obligations and budgeted operating costs.

(8)

Items affecting net income include items from the Partnership's wholly-owned subsidiaries, its consolidated non-wholly-owned subsidiaries and its proportionate share of items from equity accounted for investments. The specific items affecting net income are analyzed to determine whether any of the amounts originated from a consolidated non-wholly-owned subsidiary. Each amount that originates from a consolidated non-wholly-owned subsidiary is multiplied by the non-controlling interests' percentage share in this subsidiary to arrive at the non-controlling interests' share of the amount. The amount identified as "non-controlling interests' share of items listed above" in the table above is the cumulative amount of the non-controlling interests' proportionate share of items listed in the table.

Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-cash items, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, distributions relating to equity financing of newbuilding installments, loan loss recovery, equity income, write down of vessels, adjustments for direct financing leases to a cash basis, deferred income taxes and foreign exchange related items. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership's ability to make quarterly cash distributions. Distributable cash flow is not required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net income.

Three Months EndedDecember 31, 2013(unaudited)

Three Months EndedDecember 31, 2012(unaudited)

Net income:

52,172

37,120

Add:

Depreciation and amortization

24,145

26,227

Partnership's share of equity accounted joint ventures' DCF

before estimated maintenance and capital expenditures

37,944

27,748

Write down of vessels

-

29,367

Unrealized foreign exchange loss

4,866

6,300

Distributions relating to equity financing of newbuildings

1,261

-

Direct finance lease payments received in excess of revenue recognized

Net voyage revenues represents voyage revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions. Net voyage revenues is included because certain investors use this data to measure the financial performance of shipping companies. Net voyage revenues is not required by GAAP and should not be considered as an alternative to voyage revenues or any other indicator of the Partnership's performance required by GAAP.

Cash flow from vessel operations from consolidated vessels represents income from vessel operations before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts included in voyage revenues, (c) loan loss recovery, (d) write down of vessels and includes (e) adjustments for direct financing leases and two Suezmax tankers to a cash basis. The Partnership's direct financing leases for the periods indicated relates to the Partnership's 69 percent interest in two LNG carriers, the Tangguh Sago and Tangguh Hiri, and the two LNG carriers acquired from Awilco in September and November 2013. The Partnership's cash flow from vessel operations from consolidated vessels does not include the Partnership's cash flow from vessel operations from its equity accounted joint ventures. Cash flow from vessel operations is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's consolidated vessels. Cash flow from vessel operations from consolidated vessels is not required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP.

Three Months Ended December 31, 2013

(unaudited)

Liquefied Gas Segment

Conventional Tanker Segment

Total

Income from vessel operations (See Appendix D)

45,184

6,076

51,260

Depreciation and amortization

17,916

6,229

24,145

Amortization of in-process revenue contracts included in voyage revenues

-

(278)

(278)

Direct finance lease payments received in excess of revenue recognized

3,950

-

3,950

Loan loss recovery(1)

(3,804)

-

(3,804)

Realized gain on Toledo Spirit derivative contract

-

641

641

Cash flow adjustment for two Suezmax tankers(2)

-

(1,704)

(1,704)

Cash flow from vessel operations from consolidated vessels

63,246

10,964

74,210

Three Months Ended December 31, 2012

(unaudited)

Liquefied Gas Segment

Conventional Tanker Segment

Total

Income from vessel operations (See Appendix D)

35,451

(24,129)

11,322

Depreciation and amortization

17,359

8,868

26,227

Write down of vessels

-

29,367

29,367

Amortization of in-process revenue contracts included in voyage revenues

-

(278)

(278)

Direct finance lease payments received in excess of revenue recognized

1,475

-

1,475

Realized gain on Toledo Spirit derivative contract

-

945

945

Cash flow adjustment for two Suezmax tankers(2)

-

(1,704)

(1,704)

Cash flow from vessel operations from consolidated vessels

54,285

13,069

67,354

(1)

In early-2012, Teekay BLT Corporation, in which the Partnership has a 69 percent ownership interest, advanced amounts to P.T. Berlian Laju Tanker, the parent company of the non-controlling shareholder of the Teekay Tangguh Joint Venture, as an advance of dividends. In July 2012, P.T. Berlian Laju Tanker entered into a court-supervised restructuring in Indonesia in order to restructure its debts. In September 2013, the Teekay Tangguh Joint Venture recorded a $3.8 million loan loss provision relating to the advances to P.T. Berlian Laju Tanker, as it was probable, at that time, that the carrying value of the loan was impaired. However, during the fourth quarter of 2013, as P.T. Berlian Laju Tanker had sufficiently restructured its business, the Teekay Tangguh Joint Venture reassessed the probability of collectability of this advance and reversed the loan loss provision previously recorded in September 2013. On February 1, 2014, the Teekay Tangguh Joint Venture declared dividends of $69.5 million of which $14.4 million was used to offset the total advances to its non-controlling shareholder and P.T. Berlian Laju Tanker.

(2)

The Partnership's charter contracts for two of its Suezmax tankers, the Bermuda Spirit and Hamilton Spirit, were amended in 2012, which had the effect of reducing the daily charter rates by $12,000 per day for a duration of 24 months commencing October 1, 2012. However, during this period, if Suezmax spot tanker rates exceed the amended rates, the charterer will pay the Partnership the excess amount up to a maximum of the original daily charter rate. The cash impact of the change in hire rates is not fully reflected in the Partnership's statements of income and comprehensive income as the change in the lease payments is being recognized on a straight-line basis over the term of the lease.

Cash flow from vessel operations from equity accounted vessels represents income from vessel operations before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts, and includes (c) adjustments for direct financing leases to a cash basis. Cash flow from vessel operations from equity accounted vessels is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's equity accounted joint ventures. Cash flow from vessel operations from equity-accounted vessels is not required by GAAP and should not be considered as an alternative to equity income or any other indicator of the Partnership's performance required by GAAP.

Three Months Ended December 31, 2013

Three Months Ended December 31, 2012

(unaudited)

(unaudited)

At
100%

Partnership's Portion(1)

At
100%

Partnership's Portion(1)

Voyage revenues

171,275

79,803

113,881

51,265

Vessel and other operating expenses

57,219

27,050

24,607

11,159

Depreciation and amortization

28,004

14,140

16,653

8,583

Income from vessel operations of equity accounted vessels

86,052

38,613

72,621

31,523

Interest expense − net

(22,638)

(10,609)

(15,482)

(6,797)

Realized and unrealized gain (loss) on derivative instruments

1,969

614

13,435

4,431

Other (expense) income − net

(477)

(16)

286

477

Other items

(21,146)

(10,011)

(1,761)

(1,889)

Net income / equity income of equity accounted vessels

64,906

28,602

70,860

29,634

Income from vessel operations

86,052

38,613

72,621

31,523

Depreciation and amortization

28,004

14,140

16,653

8,583

Direct finance lease payments received in excess of revenue recognized

7,472

2,711

7,466

2,731

Amortization of in-process revenue contracts

(5,606)

(2,838)

(8,350)

(4,339)

Cash flow from vessel operations from equity accounted vessels

115,922

52,626

88,390

38,498

(1)

The Partnership's equity accounted investments for the three months ended December 31, 2013 and 2012 include the Partnership's 40 percent interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership's 50 percent interest in the Excalibur and Excelsior joint ventures, which owns one LNG carrier and one regasification unit, respectively; the Partnership's 33 percent interest in four LNG carriers servicing the Angola LNG Project; and the Partnership's 52 percent interest in Malt LNG Netherlands Holdings B.V., the joint venture between the Partnership and Marubeni Corporation, which owns six LNG carriers. The Partnership's equity accounted investments for the three months ended December 31, 2013 also includes the Partnership's 50 percent interest in Exmar LPG BVBA, the joint venture between the Partnership and Exmar, commencing in February 2013, which owns and charters-in 28 vessels in the LPG carrier segment, including 12 newbuildings.

FORWARD LOOKING STATEMENTS

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: future growth opportunities, including the Partnership's ability to successfully bid for new LNG shipping and floating regasification projects; the Partnership's ability to secure charter contract employment and long-term financing for the three currently unchartered MEGI LNG carrier newbuilding vessels ordered in July and November 2013; expected fuel-efficiency and emission levels associated with the MEGI engines to be installed in the Partnership's five LNG newbuildings to be built by DSME; the expected delivery dates for the Partnership's newbuilding vessels and, if applicable, commencing their time charter contracts; the average remaining contract length on the Partnership's LNG fleet; the Partnership's exposure to spot and short-term LNG shipping rates; and LNG shipping market fundamentals, including the short-term demand for LNG carrier capacity, future growth in global LNG supply, and the balance of supply and demand of shipping capacity and shipping charter rates in the sector.

The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: shipyard construction delays or cost overruns; availability of suitable LNG shipping, LPG shipping, floating storage and regasification and other growth project opportunities; changes in production of LNG or LPG, either generally or in particular regions; changes in trading patterns or timing of start-up of new LNG liquefaction and regasification projects significantly affecting overall vessel tonnage requirements; competitive dynamics in bidding for potential LNG, LPG or floating regasification projects; the Partnership's ability to secure new contracts through bidding on project tenders; the Partnership's ability to secure charter contracts for the three currently unchartered MEGI LNG carrier newbuildings; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts of existing vessels in the Teekay LNG fleet; the inability of charterers to make future charter payments; the inability of the Partnership to renew or replace long-term contracts on existing vessels or attain fixed-rate long-term contracts for newbuilding vessels; the Partnership's ability to raise financing for its existing newbuildings or to purchase additional vessels or to pursue other projects; actual performance of the MEGI engines; and other factors discussed in Teekay LNG Partners' filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2012. The Partnership expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.